Monday, March 27, 2017

MINNEAPOLIS ENERGY OPTIONS PAVED THE WAY FOR THE CITY TO NEGOTIATE A SHORTER FRANCHISE AGREEMENT AND A CITY-UTILITY PARTNERSHIP IN 2014

Minneapolis Energy Options campaigned for a
municipal utility authorization ballot measure so the city would have a “big
stick” to wield in case Xcel and Centerpoint showed resistance toward
negotiating the renewed franchise agreement to be more compatible with the climate
action. Having the option to municipalize was also promoted as an escape hatch the
city could use to where we could take our energy future into our own hands in
case the incumbent utilities did end up being intransigent.

(Here
is a spoiler alert to anyone who does not yet know the ending of the story.)

The
Municipal Utility Option did not materialize because City Council did not end
up putting the initiative of the ballot (described in detail in a later
chapter). However, Minneapolis Energy Options ended up pushing a key strategic
lever. Just the mere fact the city and the campaign brought up the possibility
of municipalizing proved to be powerful leverage for negotiation regardless of
whether there ended up being a ballot initiative. Passing
the ballot initiative would have changed Minneapolis’ franchise negotiating
position with Xcel by creating the presence of another OPTION. However, just
the mere presence of a big city bringing up the prospect of forming their own a
municipal utility pushed the envelope for the franchise agreement renegotiation
far enough to where the utilities had no room to publicly show an intransigent
attitude.

Kudos to city officials who
have flexed their muscle in order to open up this level of dialogue with Xcel
and Centerpoint. It helped get Minneapolis into a much greater bargaining
position for the 2014 franchise negotiations and a position that led to the
formation of the Clean Energy Partnership.

As a matter of general
principle, it is generally not advantageous to start negotiations on a
multi-year contract by folding up and conceding on too many possibilities on
the front end or refusing to examine key possibilities. It is common sense
negotiating in the business world: Why renew a long-term contract with a service provider without doing some
research and study beforehand? What is a negotiating session without the
ability to walk away if a satisfactory deal can’t be reached? If you go into negotiations without the ability to walk away
then it's not a negotiating session, it's a surrender.

While
Minneapolis did not exactly have that municipalization option to walk away
during the 2014 utility franchise negotiations, Minneapolis was able to avoid a
worst-case scenario of signing another 20-year status quo franchise agreement
that 1: does not guarantee helping Minneapolis to meet its greenhouse gas
emissions reduction targets 2: is devoid of support for investment into
localized renewable energy that would lower greenhouse gas emissions 3: offers
no financial respect toward further energy efficiency incentives.

First
of all, there was broad consensus on City Council that 20 years was an
obscenely long amount of time for a franchise agreement given rapid rate of
evolving technology.

Second
of all, a middle-ground consensus gradually emerged between both Xcel and
Minneapolis. The threat of municipalization gave Xcel had incentive to
negotiate and sign the clean energy partnership deal and keep their market
share over Minneapolis as a reward for signing onto the partnership.

What
the Minneapolis Energy Options campaign accomplished by campaigning for the
ballot initiative was laying the groundwork for a city-utility partnership that
could very well build an impressive precedent national scene as a pilot project
for other cities to follow the same suit.